ch7-2 - Chapter 7 Hypothesis Tests and Confidence Intervals...

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Unformatted text preview: Chapter 7 Hypothesis Tests and Confidence Intervals in Multiple Regression (Part 2) Confidence Sets for Multiple Coefficients Confidence set is the generalization to two or more coefficients of a confidence interval for a single coefficient. Suppose you want to construct a 95% confidence set for two coefficients, β 1 and β 2 . The set of values not rejected at the 5% significance level by the F-statistic constitutes a 95% confidence set for β 1 and β 2 . When there are two coefficients, the resulting confidence sets are ellipses (Figure 7.1). This ellipse does not include the point ( 0, 0 ) , the null is rejected. Confidence Sets for Multiple Coefficients Model Specification for Multiple Regression How do we specify our regression model? How do we decide which variable to include in our regression? The first step is thinking through the possible sources of omitted variable bias. For omitted variable bias to arise, two things must be true: 1. At least one of the included regressors must be correlated1....
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This note was uploaded on 11/20/2011 for the course ECONOMICS 220:322 taught by Professor Otusbo during the Fall '10 term at Rutgers.

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ch7-2 - Chapter 7 Hypothesis Tests and Confidence Intervals...

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